Energy prices, inflation and the ECB's monetary policy during the 2021-22 energy crisis

Stefano Neri ()
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Stefano Neri: Bank of Italy

No 1481, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Adverse shocks to energy prices exert a significant upward impact on euro area consumer prices and lead to a significant and protracted decline in economic activity. The shocks in 2021 and 2022 had a more pronounced and persistent impact on inflation than those in previous years, highlighting the existence of state-dependent effects. If the ECB had adopted a more restrictive monetary policy than implied by the actual policy rate and by the Eurosystem's balance sheet to offset the impact of the shocks on consumer prices, both real GDP and inflation would have been much lower in 2022. A response to inflation excluding energy prices could have reduced the negative impact on output.

Keywords: energy price shocks; monetary policy; Bayesian VAR; local projections (search for similar items in EconPapers)
JEL-codes: C32 E31 E37 (search for similar items in EconPapers)
Date: 2025-03
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